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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Taxes [Abstract] |
Income Taxes | 6. Income Taxes The income tax expense (benefit) included in the accompanying consolidated statement of operations represents federal, state and foreign income taxes. The components of income before income taxes and the provision for income taxes consist of the following:
Year ended December 31 |  | 2018 |  | 2017 |  | 2016
Income before income taxes: |  |  |  |  |  |  |  |  |
Domestic |  | $ | 32,907 |  | $ | 36,657 |  | $ | 35,088
Foreign |  |  | 32,151 |  |  | 15,925 |  |  | 4,097
Total income before income taxes |  | $ | 65,058 |  | $ | 52,582 |  | $ | 39,185
Provision for income taxes: |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,370 |  | $ | 2,478 |  | $ | 760
State and foreign |  |  | 6,288 |  |  | 11,014 |  |  | 2,575
Total current expense |  |  | 8,658 |  |  | 13,492 |  |  | 3,335
Deferred: |  |  |  |  |  |  |  |  |
Federal |  | $ | 3,788 |  | $ | (2,585) |  | $ | (37,828)
State and foreign |  |  | (1,236) |  |  | (3,374) |  |  | (1,896)
Total deferred benefit |  |  | 2,552 |  |  | (5,959) |  |  | (39,724)
Total income tax (benefit) expense |  | $ | 11,210 |  | $ | 7,533 |  | $ | (36,389)
A reconciliation of the Company’s effective income tax rate to the statutory federal tax rate is as follows:
Year ended December 31 |  |  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory U.S. federal income tax rate |  |  | 21.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal tax benefit |  |  | 0.1 |  |  | (0.8) |  |  | 1.9 |
Tax credits and incentives |  |  | (7.9) |  |  | (4.2) |  |  | (0.8) |
Foreign tax rate differential |  |  | 1.1 |  |  | (4.5) |  |  | (4.7) |
Impact of change in enacted tax law |  |  | (1.3) |  |  | (17.2) |  |  | - |
Change in valuation allowance |  |  | (3.0) |  |  | 4.2 |  |  | (121.6) |
U.S. tax on foreign earnings |  |  | 1.0 |  |  | - |  |  | - |
Compensation and benefits |  |  | 1.3 |  |  | (1.1) |  |  | 0.3 |
Other (A) |  |  | 4.9 |  |  | 2.9 |  |  | (2.9) |
Effective income tax rate |  |  | 17.2 | % |  | 14.3 | % |  | (92.8) | %
| (A) |  | The amount for 2018 includes the impact of reducing tax attributes due to legal entity consolidation which is completely offset with change in valuation allowance.
The Company recognized income tax expense (benefit) of $11,210 or 17.2%, $7,533 or 14.3% and $(36,389) or (92.8)% of income before income taxes for federal, state and foreign income taxes for the years ended December 31, 2018, 2017 and 2016, respectively. The change in tax expense for the year ended December 31, 2018 compared to the same period for 2017 was predominantly due to the impact of the enactment of the Tax Legislation in the United States on December 22, 2017, and the release of the U.S. federal, certain state and foreign valuation allowances in 2016. The Tax Legislation significantly revises the U.S. corporate income tax by, among other things, lowering corporate income tax rates and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The impact of the Tax Legislation in 2017 was a tax benefit of $(9,062), consisting of an increase in tax expense of $6,207 due to the one-time deemed repatriation tax, offset by the favorable impact of the reduced tax rate on the Company’s net deferred tax liabilities and other deferred tax adjustments of $(15,269) related to certain earnings included in the one-time transition tax. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized the provisional effects of the enactment of the Tax Legislation for which measurement could be reasonably estimated. Adjustments to the provisional amounts recorded by the Company as of December 31, 2017 that are identified within a subsequent measurement period of up to one year from the enactment date are required to be included as an adjustment to tax expense from continuing operations in the period the amounts are determined. During 2018, the Department of Treasury issued additional guidance with respect to several provisions of the Tax Legislation. The Company completed its accounting for the effects of the Tax Legislation under SAB 118 and recognized a tax benefit of $(131) in the third quarter of 2018 and a tax expense of $710 in the fourth quarter of 2018. The adjustments to the provisional amounts are primarily related to the one-time transition tax and the impact of the reduced tax rate on the Company’s net deferred tax liabilities. The Tax Legislation also created a provision known as Global Intangible Low-Taxed Income (“GILTI”) that imposes a tax on certain earnings of foreign subsidiaries. The Company has made an accounting policy election to reflect GILTI taxes, if any, as a current income tax expense in the period incurred. The Company has not provided deferred taxes related to the earnings of certain foreign subsidiaries that are not considered indefinitely reinvested, however, it has recognized a deferred tax asset related to the expected foreign currency impact upon repatriation. Any foreign tax on repatriation of earnings not considered to be indefinitely reinvested is expected to be immaterial. At December 31, 2018, the aggregate undistributed earnings of our foreign subsidiaries amounted to $55,707. Significant components of the Company’s deferred tax assets and liabilities were as follows:
As of December 31 |  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Inventories |  | $ | 2,135 |  | $ | 1,921
Employee compensation and benefits |  |  | 1,225 |  |  | 2,647
Accrued liabilities and reserves |  |  | 4,181 |  |  | 5,187
Property, plant and equipment |  |  | 647 |  |  | 1,045
Tax loss carryforwards |  |  | 8,437 |  |  | 10,929
Tax credit carryforwards |  |  | 26,221 |  |  | 29,744
Other |  |  | 410 |  |  | 416
Gross deferred tax assets |  |  | 43,256 |  |  | 51,889
Less: Valuation allowance |  |  | (8,962) |  |  | (11,986)
Deferred tax assets less valuation allowance |  |  | 34,294 |  |  | 39,903
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  |  | (2,545) |  |  | (3,489)
Intangible assets |  |  | (16,683) |  |  | (22,067)
Outside basis difference in foreign subsidiary |  |  | (13,750) |  |  | (13,750)
Other |  |  | (4,090) |  |  | (3,243)
Gross deferred tax liabilities |  |  | (37,068) |  |  | (42,549)
Net deferred tax liabilities |  | $ | (2,774) |  | $ | (2,646)
The balance sheet classification of our net deferred tax asset is shown below:
Year ended December 31 |  | 2018 |  | 2017
Long-term deferred tax assets |  | $ | 12,121 |  | $ | 16,228
Long-term deferred tax liabilities |  |  | (14,895) |  |  | (18,874)
Net deferred tax liabilities |  | $ | (2,774) |  | $ | (2,646)
Based on the Company’s review of both positive and negative evidence regarding the realizability of deferred tax assets at December 31, 2018, a valuation allowance continues to be recorded against certain deferred tax assets based upon the conclusion that it was more likely than not they would not be realized. The future provision for income taxes may be significantly impacted by changes to valuation allowances in certain countries. The Company has net operating loss carry forwards of $64,189 and $24,745 for state and foreign tax jurisdictions, respectively. The state net operating losses expire from 2025-2034 or have indefinite lives and the foreign net operating losses expire from 2019-2023 or have indefinite lives. The Company has general business and foreign tax credit carry forwards of $23,404, $1,493 and $1,324 for U.S. federal, state and foreign jurisdictions, respectively. The U.S. federal general business credits, if unused, begin to expire in 2024, and the state and foreign tax credits expire at various times. The following is a reconciliation of the Company’s total gross unrecognized tax benefits:
|  | 2018 |  | 2017 |  | 2016
Balance as of January 1 |  | $ | 3,645 |  | $ | 3,839 |  | $ | 4,304
Tax positions related to the current year: |  |  |  |  |  |  |  |  |
Additions |  |  | - |  |  | 31 |  |  | 208
Tax positions related to the prior years: |  |  |  |  |  |  |  |  |
Reductions |  |  | (165) |  |  | (176) |  |  | (61)
Expirations of statutes of limitation |  |  | 1 |  |  | (49) |  |  | (612)
Balance as of December 31 |  | $ | 3,481 |  | $ | 3,645 |  | $ | 3,839
At December 31, 2018, the Company has classified $32 as a noncurrent liability and $3,449 as a reduction to non-current deferred income tax assets. The amount of unrecognized tax benefits is not expected to change significantly during the next 12 months. If the Company’s tax positions are sustained by the taxing authorities in favor of the Company, the amount that would affect the Company’s effective tax rate is approximately $3,481 and $3,645 at December 31, 2018 and 2017, respectively. The Company classifies interest expense and, if applicable, penalties which could be assessed related to unrecognized tax benefits as a component of income tax expense (benefit). For the years ended December 31, 2018, 2017 and 2016, the Company recognized approximately $(13), $(33) and $(59) of gross interest and penalties, respectively. The Company has accrued approximately $19 and $32 for the payment of interest and penalties at December 31, 2018 and 2017, respectively. The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The following table summarizes the open tax years for each jurisdiction:
Jurisdiction |  | Open Tax Years
U.S. Federal |  |  | 2015-2018
Argentina |  |  | 2013-2018
Brazil |  |  | 2013-2018
China |  |  | 2015-2018
France |  |  | 2016-2018
Germany |  |  | 2015-2018
Italy |  |  | 2013-2018
Mexico |  |  | 2013-2018
Netherlands |  |  | 2015-2018
Spain |  |  | 2014-2018
Sweden |  |  | 2013-2018
United Kingdom |  |  | 2017-2018

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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